This cattleman's got a beef ...

Mike Callicrate and Ranch Foods Direct take on the big meat packers

It has been brought to such a high degree of concentration that it is dominated by few men. The big packers, so called, stand between hundreds of thousands of producers on one hand and millions of consumers on the other. They have their fingers on the pulse of both the producing and consuming markets and are in such a position of strategic advantage they have unrestrained power to manipulate both markets to their own advantage and to the disadvantage of over 99 percent of the people of the country. Such power is too great, Mr. President, to repose in the hands of any men.

-- Wyoming Senator John Kendrick, 1921, on the floor of the U.S. Senate, arguing the need for the Packers and Stockyard Act, antitrust legislation signed by President Warren G. Harding

Cattleman, rancher, beef feeder, processor, retailer and activist Mike Callicrate could give the Energizer Bunny a run for his money.

Callicrate's spare office is housed in a low-rise El Paso Street warehouse, headquarters of Ranch Foods Direct, a no-frills retail outlet that sells no-hormone, no-antibiotic, "Born and Raised in the USA" beef, processed in the Springs by G&C meat packing.

His cell phone rings on average every two minutes and he estimates he handles about 400 e-mails a day. His mind jumps from the carcasses hanging in the refrigerated packing room just outside his window to the latest news of USDA committee meetings in Washington.

Strictly hands on, Callicrate oversees every step of the beef production process for his company, setting standards for the raising of the cattle, managing feedlot conditions, overseeing slaughter, processing procedures, marketing and direct sales.

And if that weren't enough, he is the lead plaintiff in the first certified class action, antitrust lawsuit against a monopoly meat packer -- Iowa Beef Packers (IBP) -- since 1921, due to be tried in federal district court in Montgomery, Ala., in January 2004.

Constantly in motion, Callicrate runs the Ranch Foods Direct business while crisscrossing the country, speaking out on the predatory, monopolistic business practices of the "big four" meat packers -- IBP (now owned by Tyson), ConAgra (Monfort), Cargill (Excel) and National Beef (Farmland). Those four companies control about 85 percent of the American beef market, twice the rate of 20 years ago, with the first three controlling almost 80 percent.

"Competition is a four-letter word to agribusiness," said Callicrate, emphasizing that the big four domination of the market slashes the price per head of cattle paid to ranchers and feeders, pushing many of them out of business, while increasing profits for the meat packers and retailers.

Callicrate says he is dedicated to two purposes: 1) to end predatory pricing strategies by the mega-conglomerates that control more than 80 percent of the American beef market; and 2) to produce a natural, healthy product that supports farmers and ranchers by offering them a higher price per head, bypassing the corporate-dominated processing industry.

"I know I'm driven," he said. "But I just always seem to get the inspiration and the energy from somewhere."

He relates the story of speaking a few years back in a sale barn in Loop County, Neb., "the poorest county in America."

"A lady and her husband came up to me and said, 'We're so glad you're working on this project.' They said they'd just been run down, were running out of options, they didn't know how long they could hang on to the farm with prices so low.

"About a year later," said Callicrate, "that lady committed suicide."

"Suicide," he adds, "is the leading cause of premature death of agricultural producers."

The big four

Callicrate, 52, grew up in Evergreen, Colo., participating in 4-H and preparing for life as a rancher. He graduated from Colorado State University in 1975 with a degree in animal sciences, and then went to Kansas where he started out ranching and farming.

In 1978, he and a group of partners built a feed yard together in St. Francis, Kan. Callicrate managed the yard for eight years, then built his own, with a capacity of 12,000 head of cattle, in 1988.

His political activity on behalf of cattle producers began shortly after, when he realized his "inability as a cattle producer to get a fair price in the marketplace."

"I spoke out against the market power -- the big four meat packers," he said. "I really couldn't get a fair price.

"I had the cattle. There was plenty of inventory. What we needed most was the market."

But Callicrate and others were often blocked out of the market by the large meat packers, who were stockpiling their own supply of beef by entering into long-term contracts with growers desperate to get rid of their beef at any price. Callicrate says the four conglomerates were setting a system in place where they could pay as little as they wanted per head to independent producers.

At the same time, he says, the USDA was imposing abusive regulations on the little guys.

"They'd come in and require small shops to make expensive changes," he said, adding that "the USDA is, in fact, controlled by the companies they're supposed to regulate," meaning the big four meatpacking companies.

In 1996, Callicrate was approached by a fellow producer in Montana to speak to the USDA Committee on Concentration, set up to monitor industry concentration and trade practices.

"I was the only feedlot operator who would speak out against the packers," he said. "I remember I sat in a motel in Virginia preparing my statement, and I just laid it out. I ripped their heads off. I told them everything the packers didn't want them to know. "

Three months later, Callicrate and nine other plaintiffs filed suit against IBP.

Since then, he has lobbied relentlessly against the machinery that drives agribusiness -- the USDA, the big four meat packers, the rise of mega-retailers like Wal-Mart, university agriculture schools, even the National Cattleman's Beef Association, of which he is a longtime member.

Callicrate says the big four have regularly slashed the price paid to cattlemen while charging consumers more, contradicting the argument by industry supporters that consolidation creates economies of scale that create better efficiency within the meatpacking industry. If it's so efficient, Callicrate asks, then why does the price to consumers, handed down by retailers, continue to rise?

In one of his published diatribes, he called the National Cattlmen's Beef Association (NCBA) "an insidious and dangerous foe of U.S. cattlemen" because of the association's failure to support the intent of the Country of Origin Labeling law (COOL), a popular consumer-driven act included in the 2002 Farm Bill that would guarantee consumers know the origin of the beef they eat.

The big four continue to bring meat in from all over the world, in spite of recent food supply scares like mad cow disease in Canada and England. COOL, if enforced, would demand that processors label the exact origin of all the beef they sell.

But that effort was dealt a blow in a series of recent meetings at the USDA, the agency charged with enforcing it. Following an Oct. 17 meeting, a memo went out announcing that the cost of implementing COOL was double what was originally thought, $4 billion instead of $2 billion, raising the question of whether the country can afford it.

Callicrate pulls out a piece of paper from a pile on his desk and thrusts it forward. On it are the names of those present at the meeting -- two representatives of the American Meat Institute, a Cargill executive, representatives of Tyson Foods, Inc., the National Cattlement's Beef Association, the National Pork Producers Council, several representatives of the U.S. Office of Management and Budget and the USDA, and Bill Lesher whose firm represents Monsanto, Phillip Morris, PepsiCo and the USA Rice Foundation.

Ten days later, on Oct. 27, a letter from the Executive Office of the President of the United States addressed to William T. Hawks, Under Secretary for Regulatory Programs of the USDA, urged the agency to reconsider implementing the labeling rule, citing "substantial net costs on the public" and "little evidence ... that mandatory country of origin labeling would provide valuable information to consumers."

The letter continued, "... we would appreciate Departmental views on whether the Administration should seek legislative relief to mitigate these impacts."

That's a bunch of bull, says Callicrate, who immediately sent a copy of the letter out to his e-mail list with the following warning:

"We have lost our representative government in the U.S. The Bush administration is selling out our freedom to the interests of their bosses in big businesses. In [the attached] letter, the administration subverts the wishes (and existing law) of the American people by instructing the USDA to do what they can to kill country of origin labeling (COOL)."

The egg story

Callicrate's long crusade against the big four and the agribusiness industry will escalate in January when Pickett v. IBP, the class-action lawsuit of which he is a lead plaintiff, will be heard before Judge Lyle Strom in federal district court in Montgomery, Ala. Omaha attorney David Domina will argue the case.

"Mediation has already occurred," said Callicrate. "There will be no settlement. This thing is finally going to court."

The suit charges IBP of practices that violate the Packers and Stockyards Act and seeks to sue IBP on behalf of the named plaintiffs "and others similarly situated" for damages and an injunction. The class certified consists of all cattle producers who sold fed cattle on the cash market directly to IBP from Feb. 1994 to Sept. 1999.

That represents some 30,000 producers, says Callicrate.

Specifically, the suit accuses IBP of using "captive supply" to control cash market prices.

The plaintiffs contend that IBP engaged in "forward contracts" and "marketing agreements" with producers wherein the packer and producer agree on the price to be paid for the cattle weeks or months before the animals are ready for slaughter.

IBP says those kinds of agreements protect the packer from market fluctuations, and give them the ability to manage their supply chain and processing operations for increased efficiency.

"They also argue that it controls quality," said Callicrate, "but that's a lie."

Callicrate and the other plaintiffs argue that those kinds of agreements allow packers like IBP to stockpile cattle, and allow them to depress the market at strategic times in order to force producers to accept artificially low prices for their cattle.

Fundamentally, the lawsuit says that because IBP controls a large quantity of cattle by those means, they can slaughter their own cattle, or threaten to do so, locking producers out of the market and forcing them to choose between selling their cattle at dramatically low prices or being left without a buyer.

"Let's say you're someone who eats two eggs a day and you've already got four dozen in your refrigerator," says Callicrate, by way of illustration. "A guy comes by and tries to sell you some eggs. You say you don't need any. He says, 'OK, I'll lower the price,' but you say, 'Hey, I don't need any.'

"Finally he says, 'OK, how about if I pay you to take them?'

"That's what's happening in American agriculture," said Callicrate. "We're saying that IBP (now owned by Tyson) has used captive supply to lower prices in the competitive market."

The Packers and Stockyards Law of 1921 charges the USDA with the responsibility of promoting open and competitive markets. But lack of use of the law, company buy-outs and judicial decisions have eroded its cachet over the years. Still, the USDA has significant power to enforce it.

But not as much power as the big four, say critics.

"Because of IBP's power," said Callicrate, "they took away $400 per head of the producer's share of the beef dollar.

"They and their partners like Wal-Mart have done to the food industry what Dennis Kozlowski did to Tyco, what Kenneth Lay did to Enron. They're raping and pillaging taxpayers."

Should the plaintiffs prevail in their David vs. Goliath court battle, they could receive damages to the be paid to everyone certified in the class, and they could demand an injunction, a court order that might, for example, prohibit meat packers from owning livestock.

One patty at a time

While the lawsuit has been pending and between road shows, radio interviews, classroom lectures and prolific writing on the subject of the meatpacking monopoly, Mike Callicrate has, over the past three and a half years, built Ranch Foods Direct, headquartered here in Colorado Springs.

Sean Cayton

Grass-fed, no hormones, no antibiotics, Born and Raised in the U.S.A. beef from Ranch Foods Direct.

Callicrate's Kansas feedlot now sells directly to Ranch Foods, cattle that have been raised according to specific standards on an all vegetable diet with no hormones or antibiotics added.

According to the Ranch Foods brochure, Callicrate chooses and manages cattle that "genetically reach maximum quality with 180 days on feed." Ranchers agree to follow a production protocol that, he says, reduces their costs. They are also required to verify where their beef were raised to enable the use of Ranch Foods' "Born and Raised in the USA" label.

"We buy them when they're calves -- they have to be young at the time of processing," he said, explaining that younger cattle produce more tender meat, since as animals get older, they develop tougher connective tissue

Eliminating antibiotics and hormones, he says, improves meat quality as well because hormones make meat tougher, reduce marbling and flavor, and remove essential fatty acids.

"When you use hormones, you essentially make cattle bigger at processing time," he adds.

In many commercial feedlots, hormones are administered through a pellet implanted in a cow's ear. Generally it contains a steroid product that builds muscle mass.

"Industry says there are no traces in your food," he said. "I don't believe that."

Callicrate was drawn to the Springs because he wanted his beef processed at G&C, a small local meatpacking operation that has helped pioneer use of a technology called "rinsing and chilling" that removes all the blood from the beef carcass with a cold saline solution. Callicrate says rinse and chill is another natural meat tenderizing process that also increases the meat's shelf life.

"We started processing our cattle that way -- it gets the blood out of the carcass," he said. "When you remove blood, you have a higher profile of lactic acid -- a natural, biological, pathogen controlling agent."

It takes three and a half minutes for G&C to rinse and chill a cow.

"The big meat packers," said Callicrate, "kill about 350 to 400 cows an hour or one every nine seconds. At that rate, they kill 23 head in the time it takes us to process one."

Callicrate harks back to a more traditional agricultural model based on whole, unadulterated foods from local suppliers.

"My whole point is to bring back high-quality food," he said. "We're trying to develop a local foods system where people know where the product comes from, how it was processed, what's in it and what's not."

It's a labor-intensive business that pits independent producers and processors directly up against the big boys, a risky business at best.

"The fact is that those who have tried to do this before," said Callicrate, "have been driven out of business."

He points to the example of a local market whose name he asked be withheld in order to protect possible future business transactions.

"They were selling our product to happy customers, people who like to cook," he said. "Excel, a subsidiary of Cargill, went in and said, 'We don't care what [price] Ranch Foods sells meat for, we'll underprice it."

The store changed suppliers within the week.

Apathy drives the market

Consumer confidence in the multi-conglomerate beef market is high, the USDA and industry reports tell us, in spite of recent outbreaks of E. coli bacteria that received national media attention and caused the recall of 18.6 millionpounds of ground beef by Greeley, Colo. packer ConAgra in 2002.

Why isn't the public in an uproar over monopoly business practices, over quality issues, over the threat to a local food supply, over the demise of small farm agriculture?

Callicrate believes apathy drives the market as it is.

"Why isn't the public in an uproar about globalization?" he asks. "About the trade deficit? About jobs leaving the country?

"We've sat here and lost our agricultural system, our food system and people don't care so long as they can get it off the shelves at Safeway."

With his best-selling 2001 book Fast Food Nation, author Eric Schlosser exposed deplorable working conditions at the nation's large meatpacking plants. Callicrate says that the industry subverts community development in the name of economic development, which usually means higher profits for the big four and retailers.

"The large packers are nothing short of abusive to their workforce," he said. "They simply work the most desperate, economic refugees they can find. They externalize their costs on the backs of workers, onto the local healthcare system, onto a police force that has to address an increase in crime. They externalize their costs onto the environment, in nitrate levels in the water."

What ever happened, he asks, to building good, vibrant rural communities supported by agriculture?

"How about increasing income at the farm and ranch gate?" he asks.

Throughout history, he reflects, the farmer has always been the peasant, a slave. The merchant has always had the power.

"That's why it's so important in America to have antitrust laws," he says. "And that's why it's important that they be enforced."

The Bush administration, he says, has allowed agriculture to decline to a "whole, new low level."

"We've got corporations running the whole damn show," he said.

But not without a fight, at least not in the beef industry, so long as Mike Callicrate's batteries stay charged.

Beef prices are up, according to market reports, and the cost increase originates at the cost of a head of cattle -- a price that small operations like Ranch Foods Direct feel much more sharply than larger distributors with their massive stockpiled supply.

The USDA cites a short supply of beef as the culprit, noting in an October Economic Research Service report that "retail prices are likely to continue on a record-setting path as the higher prices are passed on to consumers."

The beef shortage is blamed on increased consumption of beef, with many consumers following high-protein diets like the Atkins Diet, coupled with tight supplies impacted by a U.S. ban on imports of Canadian cattle following the May, 2003, discovery of an Alberta cow with mad cow disease. The U.S. imports about 1 billion pounds of Canadian beef annually, accounting for about 4 percent of U.S. beef consumption. (On October 31, the USDA announced a plan to re-open American markets to Canadian cattle following a 60-day waiting period, a plan already approved by President George W. Bush.)

What all this means is that higher beef prices have to either be absorbed by retailers and passed on to consumers, or retailers will have to shop for cheaper beef.

Conway's and Classics switch

That is apparently what has happened at two well-known local burger joints -- Conway's Red Top and Classics Hamburgers, both restaurants that sold Ranch Foods Direct beef until a couple months ago when beef prices increased dramatically.

Classics Hamburgers owner Don Gordon says that his restaurant is purchasing beef now from U.S. Food Service rather than Ranch Foods Direct, despite an August business profile in the Colorado Springs Business Journal in which Gordon proudly declared that his company bought its meat "exclusively from Don Gibas at Ranch Foods Direct.

"Their patties are so much better than frozen -- and their special processing ensures that all meat is free of dangerous bacteria," he said in the CSBJ article.

U.S. Food Service with a regional distribution center in Denver, distributes to over 300,000 food service customers across the country, selling ground beef from the major meat packers -- hamburger patties that a 1998 University of Colorado study showed could contain meat from as many as 1,082 animals from the U.S. and abroad.

Gordon cited the increase in price as his reason for switching, adding that he hopes he can use Ranch Foods products some time in the future.

Conway's spokesperson Mary Kaye Qualey says the price increase passed on by Ranch Foods "started this whole thing," leading her company to "search for a [new] meat provider."

Conway's is best known outside of Colorado Springs as the last place Fast Food Nation author Eric Schlosser ate a hamburger. In his bestselling 2001 book, Schlosser lauded the Springs company for their hand-made burgers, "using fresh ground beef," purchased at the time from G&C Meat Processing Company in Colorado Springs.

Currently Conway's buys its meat from Mountain City Meats of Denver, through the distributor Noble/Sysco Systems.

"Getting a quality mix and getting our cost stable, that's the most important thing," said Qualey.

Making the cut

The following local food outlets are on Ranch Foods Direct's most current distribution list, meaning that they purchase some or all of their beef products from the company:

3 Doors Down

32 Bleu

Agate Hill Inn

Albertaco's

Andy's Meat Market

Barney's Diner

Bear Creek Lanes

Big Train

Billy's Pizza

Sean Cayton

Since last year, prices are up for all cuts of beef, according to the latest market report (Nov. 13).